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Wells Fargo Just Lost a Massive $2 Billion Contract with the City of Philadelphia

Wells Fargo just lost a $2 billion government contract with the City of Philadelphia, at least partly due to the bank’s “fake account” scandal.
A Wells Fargo sign is seen outside a banking branch in New York
REUTERS/Shannon Stapleton
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Wells Fargo just lost a $2 billion government contract with the City of Philadelphia — a move that appears partly related to the bank’s “fake account” scandal.

The Philadelphia City Council voted Monday to change handlers of its $2 billion payroll account, according to published reports. Instead of continuing the arrangement with embattled Wells Fargo, the city chose to hire Citizens Bank for the next fiscal year starting in July.

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The move comes under the dark cloud that has enveloped Wells since the second-largest bank by assets in the U.S. agreed to pay $185 million in fines for opening some 2 million accounts for customers without their knowledge.

More than 5,000 Wells Fargo employees lost their jobs, and several top executives were sacked. The scandal emanated from aggressive cross-selling goals in which sales people were encouraged to enroll customers in as many programs as possible.

Philadelphia city officials said the decision to switch payroll providers was not related directly to the scandal, though it seemed to play at least some role.

'The Antithesis of Corporate Social Responsibility'

"Time and time again their actions have revealed them to be the antithesis of corporate social responsibility," Councilwoman Cindy Bass said in a statement. "I want to thank my colleagues on the committee for doing the right thing and sending a message that we will not do business with companies that engage in unethical business practices."

For its part, the bank said it understood the city's decision and said it will cooperate with the transition to Citizens.

"We are proud of the support that we have diligently and professionally provided to the city in a number of capacities as its operating bank for the past several years and our highly experienced and proven government banking, securities, and treasury management teams stand ready to continue delivering outstanding service to the City of Philadelphia," the bank said, according to a statement cited by the Philadelphia Business Journal.

Related: Wells Fargo Targeted Undocumented Immigrants for Bogus Accounts

Wells Fargo will remain a depository bank for the city.

Several other cities have stopped doing business with the bank.

The bank's public standing has suffered even as it has taken measuresto correct its internal problems. The sales goals have been removed, several top executives have been forced to give back pay, and multiple other measures have been taken to ensure proper practices.

However, Wells' directors faced withering criticism during a shareholder meeting last week, and public perception continues to wane.

A recent survey by Morning Consult showed Wells Fargo second-to-last in terms of overall impressions among banks, ahead of only Goldman Sachs.